Navigating A Turbulent Macroeconomic Environment

2022 proved to be a year of uncertainties for the global economy. The war which broke out in Eastern Europe led to a surge in commodity prices, leading to a rise in inflation across economies. Rising inflation forced central banks worldwide to press their pedal on monetary tightening with the hope that by the year's end, they would be successful in taming it. Come 2023, the economic outlook remains bleak, and inflation will remain sticky, triggering fears of sustained monetary tightening by central banks.

However, despite the economic downturn, India Inc. has, by and large, remained resilient. Despite subdued sequential revenue growth, the profitability in the December quarter, for example, has largely been in line with analysts’ expectations. However, they see it moderating due to elevated levels of inflation. The resilience shows how finance leaders continue adapting to the ever-changing macroeconomic environment.

BW CFO World, through its Finance Leadership & Strategy Summit 2023, held on March 3 in New Delhi, acknowledged individuals who managed to steer their firms in these challenging times and demonstrated outstanding capabilities and achievements in the finance function. Finance leaders also deliberated upon some pressing issues concerning the finance function, such as the evolution in the role of Chief Financial Officers (CFOs), grooming next-gen finance leaders and adapting to a dynamically evolving tax system.

Growing Synergies Between CFOs & CEOs

With businesses becoming more complex, the role of a CFO has become increasingly important in supporting the CEO in achieving the company’s strategic goals. Finance leaders stated that there are growing synergies between the two positions in areas such as financial planning, analysis, and risk management.

Paras Bafna, Group CFO, Tynor Orthotics, said that in contemporary times, the CFO is not just limited to the control and audit aspects but rather looks forward to the growth of the company.

Rashmi Mohanty, CFO, SBI Cards & Payment Services, echoed Bafna’s sentiment and said that today’s CFOs are more exposed to the external world.

“There is an increasing demand from investors, lenders, bankers, and also regulators to get a CFO on the table as they know exactly what is running in the veins of an organisation,” said Mohanty.

Karun Gupta, Head of Finance, Salesforce India, reckoned that the role of CFOs has become more front-ended, and CEOs have become appreciative of CFOs playing a bigger role.

In the current dynamically evolving regulatory environment, Sethurathnam Ravi, Managing Partner, Ravi Rajan & Company, described the role of a CFO as a mid-fielder since they defend and then move to attack.

Ravi added that finance leaders don multiple hats today, ranging from debt raising, risk management, and managing shareholder agreements.

CFOs As Wealth Generators

CFOs play a vital role in devising financial strategies to drive revenue growth, reduce costs and increase profitability. A key aspect in realising these includes efficient capital allocation, which in turn generates significant returns for shareholders.

Nikhil Sohoni, Group CFO, Blue Star, said that finance leaders should evaluate investments without getting emotionally attached.

“Companies keep investing good money in bad avenues and create risk management,” Sohoni added.

Prabin Dokania, CFO, Goods & Services Tax Network (GSTN), stressed the importance of CFO’s position in evaluating investment opportunities and making capital allocations for shareholders.

On what defines success metric for a CFO, Ankit Mehta, Co-founder, Mintifi, said that it depends on the return matrix they evaluate from the investment, sales, and growth.

Hiring The Right Talent

Given the uncertainties that the global and domestic economies faced in the last three years, a crisis-resistant workforce through hiring the right talent and reskilling the existing talent becomes essential for an organisation which can withstand unexpected economic downturns.

Abhishek Gupta, Group CFO, Oyo, said hiring ahead of time helps add value to organisations as it brings scale, depth and power that raises the average bar of the organisation.

Gupta described this hiring ahead of time as Oyo's biggest and most successful bet.

Delving on hiring challenges post-pandemic, Arnab Roy, CFO, Greater India Zone, Schneider Electric India, said that the pandemic taught us how to unlearn fast.

Roy added that while evaluating an ambitious growth plan, the biggest concern that comes up is whether organisations have the right people for the right job.

S. Venkat, Founder, Practus Advisors, underscored the need to reskill the talent pool.

"It becomes important for the CFO to look at the skill sets of his or her team and figure out what I need to do to reskill my team to meet the organisational requirements," said Venkat.

Finance leaders also stated that businesses must focus on adopting technology to retain the new generation of employees.

"As the new generation becomes part of your organisation, you will need to adopt the technology; otherwise, you are going to struggle in terms of the retention aspect of it," said Rohan Pagey, Head of India Enterprise Business at Slack.

Throwing light on the use of AI in the finance function, Milind Joshi, Chief Financial & Strategy Officer, Maximus International, said, "We're rapidly moving to AI; maybe in the future, the business processes will be automated using AI. So, now the decision-making part would also be taken care of by AI, and only subjective decisions based on professional judgements will be left to the finance desk."

Joshi advised the next generation to keep pace with the latest technologies.

While generational diversity can present some challenges, such as differences in work styles, and communication preferences, Mahendra Lodha, CFO, Bloomsbury Publishing India, spoke on organisational diversity and how senior executives may contribute to the organisation." We maintain the generation part very crucially. We want to keep the elderly as mentors. They are not great with technology, but they are great at what they do," he said.

Coping Up With An Evolving Tax System

The Indian tax system is evolving dynamically, and finance leaders at the Summit deliberated various compliances for corporates.

Vivek Raju, CFO, ValueLabs, said that countries like the USA have business guidelines for dealing with grey areas to help them avoid trouble.

“In India, such guidelines are not issued, and the authorities, in a way, wait for the businesses to fall into a trap,” he added.

On the strategy for dealing with India’s business environment, driven by long litigation processes, Poornima Subramanian, CFO, Reliance Nippon Life Insurance said businesses would have to streamline their operations to stay clear from any objection or scrutiny.

Tackling Unforeseen Challenges

The initial months of 2023 have carried with them the macroeconomic turbulence of 2022. The Silicon Valley Bank crisis has triggered global contagion fears, even as experts point out that India’s banking system remains robust.

Finance leaders at the Summit contended that they should stay informed about ever-changing economic trends and anticipate potential challenges.

Vikas Wadhwan, Group CFO, REA India, said that finance leaders should balance between short-term priorities and long-term objectives.

The leaders stated that agility should become an important leadership trait among CFOs which would aid them in adjusting budgets, reallocating resources, and exploring new revenue streams.

Sameer Madan, Director - Finance, Agilent Technologies, said that CFOs are uniquely positioned and have a bird’s eye view of the entire company and industry.

Among others, the leaders suggested fostering a culture of innovation and encouraging their teams to think creatively.